B2B Collections Best Practices Checklist

Topics: Finance

Cash flow is king in any business and it starts with collecting payments from customers. However, sometimes things don't always go to plan. Businesses often find that a percentage of their customers simply don't pay their debts.

It isn't uncommon for a small number of customers to be late with their payments or not pay at all. The business owner can send an overdue invoice notice in an attempt to collect payment. In some cases, more is needed to recover payments. 

For B2B invoicing, debt collections are the next step in collecting payment. There are a few B2B collections best practices to follow, which you'll learn about in this article, that can increase your chances of collecting late payments. 

Keep in mind that the best debt collection practice is not having to collect a debt at all. Set your business up for success by preparing for debt collections. Good preparation is the key to avoiding debt collections.

B2B Is All About The Relationship

Unlike B2C (business-to-consumer) transactions, successful B2B transactions are about maintaining a relationship with your customers. Some would even say partners. B2B relationships develop over weeks and sometimes years. Letting a late payment dissolve such relationships throws away all the hard work that went into creating that relationship.

If a customer is late on their payment and an overdue notice fails to produce any results, contact the customer. This step can help maintain the relationship while also collecting payment. If contacting the customers seems to get you nowhere, it's time to move on to the next step.

Demand Letter

A demand letter is a formal notice that the customer owes a debt to you and that you are not waiving the debt (forgiving the debt). You can think of a demand letter as a paper trail should you go to court or even arbitrage. It's a record of your attempt to collect on payment. You've now moved past late notices and into format debt collection.

Several items should be included in any demand letter sent to your customer, as noticed in our Top Practices For More Efficient Business To Business Debt Collections article:

  • The names of the business creditor and the debtor   
  • Notice of debt collection informing the debtor of their due payments
  • Information about the said debt
  • A timeline within which the business debtor should make the payment and a notice that failure to pay within the deadline provided shall be a ground for litigation by the business creditor.

Debt Recovery Litigation

If a demand letter gets you nowhere, debt recovery litigation is an option. Although it can get expensive and time-consuming. To start this process, you'll need to contact a law firm. You may be required to put the firm on retainer. You'll want to weigh the cost of litigation against the amount you are likely to collect, which might not even be the entire invoice amount. If the invoice amount is significant, litigation can certainly be a viable option.

If the amount you are trying to collect is small, making hiring an attorney a financially impractical choice, you might consider small claims court. You don't need an attorney to represent you in small claims court. Costs are also inexpensive.

For larger collections, a civil case may be necessary. For civil cases, you'll want to hire an attorney.

Debt Collection Service

Similar to retaining a law firm to collect on debts, a debt collection service or debt collection agency provides a similar service and often cost much less than hiring an attorney. They have the expertise and tools available to collect debt, since that is all they do.

When researching debt collection agencies, there are a few things to look for, as noted in our B2B Debt Collection  article:

  • State-licensed and/or bonded (where applicable)
  • Insurance (Errors and Omissions Liability Insurance)
  • Ability to find debtors who may have skipped town (skip tracing). This may require an agency who is licensed in all states involved.
  • References
  • Check ACA International 
  • Better Business Bureau 

Creating A Collections System

Collecting on B2B debt isn't likely to be a one-off event. Your first time will be the most difficult because you'll be learning.  After that, each collection should be a little easier. Knowing you'll be collecting debts in the future, building a system that you can follow and enhance each time you go through the process can help make your collections more efficient.

By creating a written out collections process, it will be easier for employees to follow and track each collection engagement. No two collections are going to be exactly the same. For this reason, you may find yourself adding new steps or modifying others. These revisions allow you to improve your process.

Keep detailed notes of each collection. These notes will create an audit of each collection, while also letting you score how well the collection went. From there, you can create official collection policies. Not only can such policies be shared with your employees but also with customers. Having a collections policy will remove any surprises and set expectations for customers and employees alike.

Expanding Your Collections Process

The above B2B collections best practices are by no means exhaustive. If you've created a collections system and follow it, you'll soon find that you are creating more best practices by removing what doesn't work well and keeping what does. The result will be an efficient B2B collections process that is unique to your business.

Net terms accounts receivable


Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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